The energy market has seen some record breaking moves in 2020. Never mind how the May 2020 crude oil contract went $37 negative, the magnitude of the ups and downs has been off the charts.
In our latest analysis at ETFguide TV, John Love the CEO at USCF Investments provides historical context. Love points out that since the start of crude oil futures trading in 1983 there were only five occurrences recorded when crude moved 20%. Moreover, four of those times have already occurred in 2020.
The Coronavirus outbreak has triggered global lock-downs, triggering shutdowns in industry sectors closely tied to oil demand like airlines, transportation and tourism. Energy stocks (XLE) within the S&P 500 have been among the worst performers and under-capitalized companies within the sector will be forced to merge or go away.
The swing by oil futures contracts into negative territory has caused some operational challenges for oil linked ETFs like the United States Oil Fund (USO). Although USO and other funds like it use oil contracts to obtain their market exposure to crude, the price of the ETF cannot be negative even if the underlying contracts go negative.
Beyond oil, Love examines industrial metals like copper (CPER) to size up any signs of a rebound. China, as Love points out, may be a key indicator as to what happens with demand for industrial metals. It may also provide a roadmap for economic recovery in other countries that have been hit by the Coronavirus.
Finally, Love provides some valuable tips for both individual and professional investors on how to successfully deal with emotional side of wild market moves.